7/07/2009 @ 6:00AM

Questioning Oracle's Cloud

When Larry Ellison announced last month that Oracle was going to embrace cloud computing, he put forth ideas that expand on the current models. With the Sun acquisition and the rest of its formidable portfolio, Oracle has all the pieces of the puzzle to do something revolutionary. The key question: Will Oracle have to clean up its fragmented collection of applications to achieve its vision?

From my perspective, the answer is yes. Even Oracle cannot afford to “cloudify” each part of its application portfolio. The first thing to realize is that Ellison’s statements were only hints at a strategy. A company like Oracle has to be extremely careful about making statements about what it will do in the future.

Oracle has thousands of customers who are using its business applications. These companies want to know they will be taken care of. An enterprise software vendor’s promise to its customers is that the product will evolve to meet new challenges without major disruptions. Most companies that have implemented large-scale software systems have found it expensive, and at times traumatic, and don’t want to be forced to change at any time in the future.

So by these standards, what Ellison said was pretty dramatic. First, he said that Oracle’s Fusion middleware products would be “on-demand ready” and available for license by subscription. So this means companies can have integration hubs in the cloud.

But the bigger news was that Ellison figured out a market that competitor
Salesforce.com
wasn’t targeting: software hosted and stored by a customer but managed by a software vendor. When you add this to “industry in a box,” phrase used by Oracle co-President Charles Phillips when he described the Sun acquisition, the direction becomes clear. My opinion is that Oracle is going to deliver the benefits of cloud computing by selling software that is delivered through remotely managed appliances.

I have been suggesting for awhile that appliances are a key way to deliver software (See “Disrupting IT” and “Why Google Isn’t Enough”). IT departments want the benefits of the cloud, more configurable software, accessibility through a browser, transformation of CapEx into OpEx, freedom from administrative and operational responsibilities and instant access to more computing resources. They couldn’t care less where the box running the software resides.

It turns out there are a lot of advantages to having the software reside in your data center. First, you don’t have to move large amounts of data back and forth between a remote cloud host and your on-premise applications. Second, you have substantial amounts of control, but still have much of the complexity managed by someone else. For example, it is much easier to craft a disaster recovery strategy that you can guarantee will work with an infrastructure based on appliances. Appliances are less strong in providing instant access to more resources, but for most stable enterprise applications, this is not a big problem.

Here’s how Oracle could deliver remotely managed appliances. Sun’s Solaris operating system and its hardware can be used to build the box. Software can be remotely installed, configured and maintained by Oracle’s experts who monitor the application from a remote data center. The license model could change from an enterprise license to a per-user subscription. So far, so good.

The problem is that Oracle’s software is not ready to be deployed in this manner. The first two benefits of the cloud, software that is easier to configure and accessible through almost any browser, is not something that Oracle’s products or any enterprise software vendor’s products can deliver as well as Salesforce.com. I don’t believe that multi-tenancy is required, especially in the appliance model, but I believe better configurability is. This is the most important achievement of Salesforce.com, in my opinion.

So, what is Oracle to do? Can it announce that it will make all of its product suites deliverable in a box (that is, an appliance)? This collection includes Oracle Apps, PeopleSoft, Siebel and many others. My contention is that Oracle cannot afford to make such improvements for all products. If I am right, then Oracle will only be able to afford to adapt one or two of its product lines in this manner. It would be more efficient to pick one. But then this will anger the clients using the platform that was not picked (to the delight of Oracle’s competitors).

You could argue that Oracle could deliver its application without modification in a box. But why would customers bother making such a change without a significant advantage? Oracle will not be keen to lower its prices. But to switch the payment model to a subscription basis, the company must offer some substantial benefits. If just putting the software in a box is enough, other companies like
SAP
will be able to quickly follow suit.

Remember: What Salesforce.com has achieved in configurability and instant deployment is what drives its sales. Customers don’t care about multi-tenancy. For Oracle to win, its software must become more configurable and easily available, but that won’t happen for all products at once. How will it happen? Which products will become the focus? Will the software in a box be better software or just the same stuff that’s on the market now? These are the questions Oracle has put before its customers by bringing up the cloud. Customers shouldn’t expect answers anytime soon, but Oracle also shouldn’t expect these questions to go away.

Dan Woodsis chief technology officer and editor of Evolved Technologist, a research firm focused on the needs of CTOs and chief information officers. He consults for many of the other companies he writes about. For more information, go to www.evolvedtechnologist.com.